Directions of Railway Transport Development for Prospective

Cooperation with Logistics Providers

Juliana Evgenievna Zhuzhgova

and Yan Aleksandrovich Ruf

Ural State University of Railway Transport, Yekaterinburg, Russia

Ural Branch of VNIIZHT JSC, Yekaterinburg, Russia

Keywords: Transport logistics, logistics providers.

Abstract: The article is devoted to the study and evaluation of the promising process of interaction of railway transport

with high-level logistics providers who are responsible for conducting business processes of logistics

organizations-shippers. The place of logistics outsourcing in the transport market of the Russian Federation

at the current time and its prospects in the near future is described, the organizational structure of logistics

providers is considered. The main strategic prospects for railway transport from interaction with high-level

logistics providers in terms of the development of digital and logistics products are listed. The main indicators

of the transportation process necessary for interaction with logistics providers in the operational mode are

listed. The necessary directions for the development of railway transport in terms of digital logistics systems

and the main structural transformations necessary for effective and synchronized interaction with logistics

providers in the interests of shippers-customers have been identified.

1 INTRODUCTION

The modern logistics services market is constantly

moving towards the search for advanced technologies

and new logistics business process management

systems and their synchronized interaction with other

business processes of customer enterprises. As this

movement progresses, there are some very significant

and some barely noticeable shifts in trends that have

a high impact on the general concept of logistics and

its place in the world. Each person faces some

logistical processes to a different extent, which he can

notice in his gadget, a simple example is online stores

in which the customer sees operational information

about technological operations with his ordered

goods. If you pay attention to enterprises, then for

them operational information related to logistics

processes is a tool for coordinating and generating

reports necessary for forecasting their own

production activities and its audit.

Thus, for a long period of recent years, the trend

of logistics providers is gaining popularity, which,

depending on their own capabilities and contractual

relations with other organizations, provide a different

range of services for organizations, from partial

outsourcing to a full-fledged network business with

sales services. But in this article we will not talk about

the classification of logistics providers and their

technical capabilities, but about how railway

transport does not stand aside when popularizing such

an approach as logistics outsourcing, but on the

contrary, get its own, strong competitive advantages

that will work as drivers of the development of

internal logistics services and attractiveness for

logistics providers in the future.

The purpose of this work is to develop certain

objective parameters and directions of railway

transport development necessary for long-term

integration and interaction with logistics providers of

all levels.

The interaction of railway transport with logistics

providers plays an important role in the direction of

additional commercialization of the transportation

process necessary for the self-development of this

strategic industry as a whole. Given the importance

and role of rail transport worldwide, its effective use

in supply chains in cooperation with logistics

providers opens up great frontiers for the

development of global logistics systems and "green"

logistics, as rail transport is rightfully considered the

most environmentally friendly today.

224

Zhuzhgova, J. and Ruf, Y.

Directions of Railway Transport Development for Prospective Cooperation with Logistics Providers.

DOI: 10.5220/0011582000003527

In Proceedings of the 1st International Scientiﬁc and Practical Conference on Transport: Logistics, Construction, Maintenance, Management (TLC2M 2022), pages 224-229

ISBN: 978-989-758-606-4

 2023 by SCITEPRESS – Science and Technology Publications, Lda. Under CC license (CC BY-NC-ND 4.0)

2 MAIN PART

High-level logistics outsourcing has begun to occupy

good positions in the transport market, as it gives

enterprises additional opportunities, thanks to which,

logistics-related issues are partially or completely

removed from enterprises, because competent

organizations that have relevant experience and skills

behind their backs begin to deal with this area.

Depending on the levels of service, services for

transportation, warehousing, labeling and further on

the list up to the sale and delivery of certain goods to

the end consumer can be provided. Each customer can

choose for himself the optimal volume of services

provided necessary for his comfortable production

activity. For example, many large manufacturing

enterprises have the logistics business process

completely outsourced to logistics providers, which

allows enterprises to keep the focus on their core

business.

At the moment, high-level logistics outsourcing in

the Russian Federation, in which the transfer of

business processes of the logistics of the enterprise

takes place, is at the initial stage of popularization for

a number of objective reasons:

− A non-standard format for the commercial

sector - at the moment there is a certain distrust

of such serious decisions as the transfer of the

entire logistics business process into the

"wrong hands", but in the near future a small

adaptation is required in order for this to be

perceived as a normal part of the production

activity of the enterprise;

− It is perceived as technically difficult – indeed,

the process of integrating a logistics provider

into the customer's logistics business process

takes some time, but given the qualifications of

the provider's staff, this is not unattainable, the

formed joint working group will solve this

issue quite quickly and systematically;

− It has a number of "blind spots" for large

manufacturing enterprises – a certain number

of large manufacturing enterprises need to see

the entire production chain before the fact of

the transfer of goods to the customer online in

order to have time to generate appropriate

reports and analysis of situations for

subsequent production adjustments on a daily

or shift basis, but not all logistics providers

have the technical capability for operational

translation the entire process of working on the

customer's logistics in online mode, since

supply chains usually consist of a large number

of technical processes and not at all stages there

is the possibility of such broadcasts online;

− Misunderstanding of the benefits of its use –

not all organizations currently understand that

logistics is not the purchase of several trucks

and the maintenance of a certain staff, but a

more complex and deep process that requires a

large amount of maintenance and technical

support. The savings when using outsourcing

are in the range of 20-30% on average, and the

efficiency of the organization can increase by a

third (Simonova, 2018).

Thus, high-level logistics outsourcing in the

Russian Federation has not yet reached the desired

result that would allow it to be identified as a major

branch in the transport market, but the events of 2020

gave a strong impetus to digitalization and the

creation of new logistics services for shippers.

The term Third-party logistics (3PL) appeared in

the late 1980s and implies just the transfer of a part or

a large volume of logistics to outsourcing, but from

the Russian side the first requests for services of this

level appeared in the early 2000s, while there was no

offer (Polous, 2016). That is, there is a small time lag

in this direction, which is now being compensated

quite quickly.

Outsourcing, including logistics, is a fairly

familiar segment of production activity. On large

railways, at least 20% of work has been outsourced,

in some types of activities this figure is up to 50%

(Konstantinov, 2021). For this reason, high-level

logistics outsourcing in the transport market will be

quite widely used in the coming years, this is an

inevitable process, because it is general trends that

shape changes in approaches to logistics processes.

Now it is worth moving on to how rail transport

can ensure its profitable and efficient coexistence

next to logistics providers. Logistics is often

compared to a chain: in it, individual links are closely

interconnected (Solntsev, 2018). In the same way,

high-level providers act, their activities are a chain of

various processes, obligations and third-party

interactions that are aimed at maintaining their own

logistics infrastructure, into which the transported

goods of customers are processed. Rail transport can

be a very solid support in this chain, that is, to become

a full-fledged part of it in the interests of the provider.

In this case, a slightly different approach to

interaction with a logistics provider is being

considered than just contractual relations for the

carriage of goods by rail, this is what will be

discussed now. The main indicators of railway

transport, which can be identified as key for logistics

providers, are:

Directions of Railway Transport Development for Prospective Cooperation with Logistics Providers

225

− High load capacity and carrying capacity;

− Relatively low cost of transportation;

− Cargo safety.

That is, with the participation of rail transport in

the supply chain of a logistics provider, first of all it

will affect the cost of providing services to the

customer in the direction of its reduction, which is a

competitive advantage for a logistics provider in a

developing transport market. But there is a very

important nuance, modern logistics is shifting

towards IT solutions, under the management of which

it is possible to build the entire process through an

integrated data analysis system (Perepelitsa, 2017).

Accordingly, this means that all logistics systems

functioning for all participants interacting with a

logistics provider should be able to promptly

exchange information and form a common digital

environment online.

The interaction of the logistics provider with the

customer in terms of maintaining common

information systems depends on the appropriate

volume of services provided. If a logistics provider

provides a small part of the services for the customer,

then this may be a standard contractual relationship,

but if we are talking about highly efficient service,

when the entire logistics business process is

transferred under the control of "the hands of a single

person", then this is a completely different level of

integration and mutual synchronization of

information systems with the building of the

necessary services for operational monitoring

logistics activities by the customer and logistics

provider. Accordingly, on the part of the Russian

Railways holding, in the future there should be

separate digital business blocks that will be able to

interface with external systems, this is one of the key

tools for the effective use of railway transport in

cooperation with high-level logistics providers.

The development driver for digitalization and

information systems of railway transport was both

strategic goals in general and the global event of

2020, when remote access mode became one of the

measures to prevent the spread of coronavirus

infection. A sharp jump in the containerization of

freight transportation in 2020 made container

transportation the most relevant and fastest-growing

segment of rail transport, and efficiency improvement

was proposed through transportation routing

(Gusachenko, 2020). A good example of digital

railway transport products is an electronic trading

platform in the field of freight transportation and

integrated transport and logistics products (ETP GP),

designed for electronic ordering, receiving services,

reserving loading resources, making calculations and

tracking fulfillment. During 2020, there was an

increase in demand for the services of this platform

from shippers (Briefing: industry news: [rail

transport], 2020), and in 2021, more than 70% of

legally significant procedures are already being

processed on the platform, digitalized: contractual

work, transportation planning, order execution,

payment, work with claims (Gusachenko, 2021) and

the ETP GP turns into the main tool for organization

of transit rail transportation from China to Europe

(Konstantinov, 2021). This is an example of one of

the products, how demand and market trends change

in a short time in the direction of complex systems

that must meet certain digital requirements to be able

to access them from the outside.

Turning to the perception of a new trend that

logistics providers have great prospects and the

development of the transport market of the Russian

Federation as a whole, it is necessary to develop a

concept of what strategic tasks in this direction should

be achieved in the near future, as well as identify the

benefits for rail transport.

The prospects for cooperation between rail

transport and high-level logistics providers are the

following key criteria:

− Attraction of a large range of goods for

transportation by rail, including goods that left

the railway during the Soviet era due to

relatively low rates of route speeds on the

common network;

− Accumulation of infrastructural changes in

terms of terminal and warehouse facilities and

transportation process;

− Development and unification of information

and digital systems of railway transport

production processes;

− Diversification of the activities of the Russian

Railways Holding;

− Parallel additional commercialization of

activities, which in modern conditions is a

normal practice for large manufacturing

enterprises;

− Attractiveness for international cooperation

with logistics providers, as a large volume of

transit passes through the railway common

network;

− Accumulation of the development of new

logistics equipment for commercial operations

with customer cargo – new warehouse

accounting and control systems, sealing

devices, monitoring systems, etc.;

− Increased interaction with other modes of

transport and a higher level of connectivity

with their information platforms.

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It follows that promising cooperation with high-

level logistics providers in the future looks like an

opportunity for the railway to take a leading position

in digital services and flexibility in the transport

market, but based on current conditions, the

development of local and international logistics

providers will happen much faster than it may seem.

A logistics provider acts as a system in which a

regularly interacting or interdependent group of

elements forms a single whole (Ross, 2015). The task

of all elements is to satisfy customer requests in terms

of performing certain logistics tasks and maintaining

a built-up common logistics infrastructure in terms of

efficiency of interaction and synchronized work

process.

Each logistics provider has its own way of

building a logistics system, someone has an extensive

own infrastructure and a small amount of parallel

contractual relations with carriers of regional or

international destination, some logistics providers act

as a management company, which has a large volume

of contractual relations, allowing the logistics system

to work and maintain its own chain elements.

Figure 1: Logistics provider structure.

But all types of logistics providers agree on one

thing, if we are talking about a high level of service,

the entire logistics business process is in a transparent

digital environment in which both the customer and

the logistics provider are present. The customer

conducts his own observations necessary for

accounting, and the logistics operator conducts his

work – the process of controlling warehouse

operations, transportation, labeling, shipment,

processing, customs operations, reports, etc.

Accordingly, it is in this system that there will be a

need for the presence of railway transport to monitor

the accounting and control processes necessary for

the provider.

This is why a number of structural changes are

needed within the functioning of railway transport,

aimed at ensuring the possibility of external

interaction with logistics providers and local

customers, as well as ensuring the internal

information security of the holding. The first step in

this direction is the division of the freight transport

sector into strategic and commercial. Strategic ones

assume direct obligations of the Russian Railways

holding to the state, while commercial ones are aimed

at attracting additional profits for the holding. The

need for such a separation is caused by ensuring the

security of the railway software complex systems as

a whole, since it includes a large number of different

systems of different levels of administration,

therefore, if the block of interaction with external

logistics providers is in the common tree of all digital

railway transport systems, any cyber attack or

disruption of one of the elements of production

processes can disable other elements, including those

strategically important for the overall functioning.

The next important stage is the creation of

logistics products that have similar characteristics to

logistics providers, that is, the formation of a logistics

system based on the railway transport network that

will be responsible for commercial freight

transportation. But, given the prevailing conditions of

the transport market, when preference is given to road

transport, logistics services should provide high route

speeds, this is a strategically important issue, because

in order to build interaction with logistics operators,

an urgent need is to raise route speeds in domestic

traffic. Such opportunities also open up prospects for

railway transport and the accumulation of domestic

freight traffic, including interaction with small and

medium-sized businesses of the Russian Federation.

The overall digitalization of rail transport also

plays an important role in shaping it as a participant

in the supply chain in the interests of logistics

providers. Digitalization of the elements of the

production processes of railway transport will make

it possible to represent all the individual elements of

internal interaction in the form of business processes

and form effective tools for servicing shippers and the

overall functioning of the network from them.

The most important issue that is responsible for

the interaction within the logistics provider's system

is the creation of an information cargo platform, the

task of which is to further integrate with the logistics

provider's information platforms, which will ensure a

strong connection of rail transport in the logistics

provider's supply chain. This cargo platform should

deal specifically with new logistics services, because

the fundamental format of transportation is irrelevant

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for high-level logistics providers. This is an

absolutely different product from all current digital

systems operating in the Russian Railways holding,

its task is to ensure work with logistics providers on

the principle of a "single window", without any

intersection with current systems, it should be

isolated and responsible only for that part of the

infrastructure that will concern only logistics

processes, related to interaction with a logistics

provider. That is, at the stage of agreeing on the terms

of interaction with a logistics provider in terms of the

volume of services provided, specific directions of

movement with specific transportation conditions, the

volume of necessary infrastructure facilities for this

interaction, specific monitoring levels and conditions

related exclusively to the logistics provider should be

entered into the information platform:

− data on shipments in logistics systems – real-

time operational information about shipments

to different destinations;

− data on the movement of freight trains –

operational information about the departure

and destination stations, the location of the

rolling stock, information about additional

operations to which the rolling stock is

subjected (change of locomotive, locomotive

crew, etc.);

− operational information on emergency

situations – informing the logistics provider in

case of emergency situations on the way of the

freight train;

− data on cargo operations performed –

operational information about performed and

upcoming cargo operations in the logistics

system of railway transport.

Monitoring of almost all processes on-line is vital

for logistics providers, because their logistics is built

on the principle of "just in time" and deviations from

the delivery time of goods needed by the customer

can cost logistics providers reputation, and a damaged

reputation when organizing the logistics business

process on the principle of "in the wrong hands" puts

an end to subsequent joint projects of the logistics

operator and its customer. Providing a high level of

service to the logistics provider's requests is a

guarantee of long-term and mutually beneficial

relations in the transport market.

When achieving such levels of interaction with

logistics providers, the issue of cybersecurity is also

important. Maintenance and upkeep of information

systems should be accompanied by multi-level cyber

defense systems, which is necessary to prevent, first

of all, deliberate attacks on logistics platforms. Quite

often, information platforms are faced with cyber

attacks by intruders, after which it takes some time to

restore all systems, because the damage stretches

from simple disruptions to complex ones. That is why

it is better to keep a commercial logistics platform

separate from the main vital information platforms of

railway transport, which ensure the fundamental

operability of systems. This will allow you to always

win if the logistics provider's system is under attack

or there is a standard failure, by rail its part of the

contractual obligations will be fulfilled due to the

fundamental principles of the organization of

transportation.

3 CONCLUSIONS

Thus, in the near future, logistics outsourcing will

receive further growth and prospects for development

in the transport market of the Russian Federation, this

is primarily due to the constant increase in the needs

of shippers, because supply chains are becoming

more complex due to the commitment to the principle

of "just in time". In any case, high-level logistics

outsourcing will be reduced to information platforms

that interact and synchronize between participants in

the transportation process in the interests of the

provider. The approach of interaction with logistics

operators makes it possible to focus specifically on

targeted production activities.

Rail transport is a promising mode of transport for

interaction with logistics providers due to its own

strengths – load capacity and relatively low tariffs for

cargo transportation. For this reason, an important

aspect is the setting of strategic goals related to the

self-identification of railway transport in the Russian

Federation market as a full-fledged logistics system

that is amenable to digitalization and functions both

at the fundamental level and at the level of complex

logistics systems linked and coupled into a single

information space in which the elements of the

system interact.

This leads to the key development directions for

rail transport as a promising participant in the supply

chain of a logistics provider, described above:

1) Division of the cargo transportation business

process into strategic and commercial;

2) Creation of new logistics products aimed at the

commercial sector and increasing route speeds;

3) Continuation of work in the direction of

digitalization of railway transport;

4) Creation of a separate logistics information

cargo platform, which will be responsible for

the interaction of rail transport and logistics

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providers on the principle of a "single

window";

5) Providing a multi-level cybersecurity system.

Together with these criteria, we can talk about the

diversification of the activities of the Russian

Railways holding, which has the makings for

complex progressive transportation process

management systems using external interaction with

high-level logistics providers.

Also, looking ahead to the future, logistics

systems are highly likely to be reduced to full

monitoring of all technical means associated with the

performance of any operation along the route of any

vehicles. This means that in addition to identifying

and monitoring cargo operations, it will be possible

to monitor the condition of technical means online, as

this area is actively developing, because the safety of

the transportation process is a priority. The

availability of such systems is a significant

competitive advantage for rail transport in the long

term.

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